MPower Partners: Supporting start-ups in their ESG journey

MPower Partners

Signatory type: Investment manager

HQ location: Japan

Covered in this case study

Asset class: Venture capital

Georgraphy: Japan

Sector(s): Technology

MPower Partners, a global venture capital fund founded in 2021 by three women—Kathy Matsui, Yumiko Murakami, and Miwa Seki—invests in mid and late-stage companies that provide tech-enabled solutions to societal challenges. We integrate ESG principles in our operations and investment process, from deal sourcing to due diligence and post-investment portfolio support.

Why we integrate ESG factors into our investments

We believe companies, including start-ups, that thoughtfully consider and integrate ESG factors can create long-term value. Indeed, our founders have championed non-financial factors in economic and financial analysis in the Japanese markets for several decades.^[1]

Since launching MPower, we have been committed to integrating ESG standards in all aspects of our fund operations and investments, to achieve our mission of:

• empowering bold, globally-minded entrepreneurs providing tech-enabled solutions to societal challenges;
• helping innovative companies to drive sustainable growth through ESG integration; and
• revolutionising Japanʼs venture ecosystem via greater globalisation, diversity, and innovation.

Through these activities, we aim to promote ESG-integrated investing in the venture capital industry.

How we integrate ESG factors into our investments

We invest in companies that promote sustainable living through technology, led by management teams that proactively manage ESG risks and opportutnities.

Alongside our fundamental assessment of a business, we conduct a high-level ESG evaluation, to understand a company’s ESG maturity, where ESG risks may lie, and how we can help add value to a company’s ESG integration process.

To ensure that the founders are committed to integrating ESG principles, we ask them to sign a standard ESG Memorandum of Understanding (MOU) prior to making an investment. It outlines how we expect a company to engage with us after investment regarding ESG issues and a cadence for ESG-related meetings for the duration of our investment.

Post-investment, we provide hands-on support for each of our portfolio companies to create an ESG roadmap, which includes providing them with:

• a proposal for monthly actions;
• a start-up ESG playbook – the what and why of ESG integration for start-ups, and step-by-step guidance on developing an ESG roadmap – and other resources to get started;
• guidance on what we consider to be material ESG factors; and
• guidance through monthly check-ins or by participating in ESG team meetings.

We maintain an ongoing dialogue with each company regarding their roadmaps and closely monitor their progress.

Example: Supporting WOVN’s mission to create a more inclusive web

WOVN Technologies provides localisation services for websites and applications, reducing the cost and time of developing and managing multilingual websites, and expanding the reach of large enterprises and municipal governments.

WOVN’s mission – to “create a world where all people can access all data in their native language” – goes hand-in-hand with embracing and improving diversity and inclusion, which it believes is key to its business growth.

With representatives from over 25 countries, WOVN’s employee base is not typical of its peers – fewer than 10% of employees hold non-Japanese nationality at the majority of Japanese start-ups, according to a joint MPower and Boston Consulting Group survey of 50 companies conducted from June to July 2022.

WOVN raised JPY5.4 billion in July 2021, and we participated in that funding round. Following our investment, WOVN formed a cross-functional team to link its mission and vision to ESG principles, develop a list of material ESG factors, and oversee the implementation of ESG-related actions and commitments, to deliver on the ESG roadmap outlined in our MOU.

WOVN’s materialities and commitments include:

• Environment
  • Combat climate change: We will measure and reduce greenhouse gas emissions. In order to make more efficient use of energy, in the office, use air conditioning efficiently by setting the thermostat to a reasonable temperature and encourage business casual and casual wear. In addition to installing efficient LED lighting workspaces and meeting rooms, we will raise awareness of climate issues by setting up lighting appropriate to the area and time of day and installing auto-off switches.
• Social
  • Co-create a multilingual world with stakeholders: We cannot realize the “multilingual world” without collaboration with our stakeholders. In addition to empowering more companies to localize with WOVN, we will form a community with our clients and language service providers. This is to further underscore the need for a multilingual world and provide the expertise to make it happen.
• Governance
  • Promote diversity in the management team: Promote diversity in the management team. We believe that incorporating diverse perspectives and values in management-level decisions promotes innovation, is important for good governance, and leads to sustainable corporate growth. To further strengthen diversity, we will encourage the appointment of women and non-Japanese directors.

We have supported the team by providing:

• case studies and other resources that demonstrate best practices for identifying materialities and mobilising stakeholders, drawn from public companies rather than unlisted peers, and start-ups outside of Japan, as ESG integration in private companies is still very nascent here;
• guidance and input during monthly meetings; and
• close support in shaping publicly facing content, such as WOVN’s ESG website.

While many Japanese companies embark on ESG activities ahead of an IPO, WOVN realised that it is advantageous to start early, as it can take time for results from initiatives to materialise.

In the next phase of our support, we will help WOVN to define appropriate ESG metrics and work through any hurdles the company may face in carrying out their ESG commitments and goals.